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Posts Tagged ‘Prices’

This past weekend I rolled the bike out of the garage to enjoy the blue sky and 59 degree weather.  Wow, it doesn’t get much better in the northwest for an early spring day!  Never mind that it snowed the very next day!

I headed to the local Shell station and as I topped off the gas tank I tried to recall which of the political candidates detailed how the oversupply in natural gas had caused its price to crash, and then, just when you thought they were about to blame Obama for destroying the income of all those poor natural gas folks, pivoted on a dime and used it as a supporting argument for why $2.50 a gallon gas is very do-able… right, just as the average price of gasoline has increased by 42 cents, from $3.36 to $3.78 per gallon since the beginning of the year.  And that’s from the U.S. Energy Information Administration, and it’s an average of all grades, all formulations, across all regions of the country.

Yet, somehow, the politicians know where there’s enough oil to cause a world oversupply, or something to drive the price down.   Huh?  All I know is that $4 a gallon “creates some very real challenges” for average American families and their household budgets.

The “drill baby drill” makes for a nice bumper sticker. But, the real answer, is there’s no quick fix.  Gasoline prices are linked very tightly to crude oil prices.  The rule of thumb is that a $1 increase in the price of crude produces a 2½-cent increase in the price of gasoline. Lately, gasoline prices have been linked most closely to the price of Brent crude, and since the beginning of the year Brent has gone up from $107 to $123, a $16 increase.   Clearly some of the price difference is also related to oil speculators on Wall Street. Sanctions on Iran may be hurting their ability to ship crude. Additionally, some analysts think that some of the price increase is driven by fear that Iran might cut off oil shipments entirely, or else slow or close the Strait of Hormuz. In other words, some of the pricing might be driven by fear, uncertainty and doubt (FUD).

Clearly demand for oil is pushing up against supply limits, and that’s a permanent condition.  And when supply and demand are tightly constrained, any small bump in demand or disruption in supply causes a big swing in prices for you and I. Last year it was the war in Libya that caused a price spike. This month it’s Iran. But it’s always something and it doesn’t take much anymore to produce a $30 swing in oil prices.

We need to change the conversation.

Yeah, I’ve read about the new shale oil finds in North Dakota too.  It might increase global supplies a bit, but probably not enough to make up for increasing demand from China and other emerging economies. Basically, prices are going to stay high for the foreseeable future.  Like it or not, this is our future.

I recommend buying a motorcycle!

Photo courtesy of Shell

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Ambitious new motorcycles.

Nine in fact for 2010 as Bill Davidson (VP of Core Customer Marketing) stated at last year’s launch of the new models: “We are thrilled to offer our customers nine new models and a full selection of products… that lets their enthusiasm for enjoying great motorcycles continue at full throttle!” [exclamation point added for emphasis]

There were exciting features – sarcasm alert – like “slammed suspension,” “an optional flame paint scheme,” “a larger front wheel,” “a new tail light assembly,” and a lot of something called “light and lean extreme.”  Huh?  It’s massive changes like these that are really going to bring in the customers.  And with the unprecedented new plating process called “midnight pearl” used on the headlight cover, timer and derby covers, and fender struts young people will have these motorcycles flying out of dealers.

Now comes the introduction of the $35,999.00 MSRP Harley-Davidson CVO Ultra Classic Electra Glide.  The equivalent of two Honda Civics LX’s which cost $35,210 and money left over to install the optional Moonroof!  Or you could buy a tops down 2010 Lexus IS 250 Convertible for $35,495 and still have money left over for a kick butt pizza party!

My point?  Can a 107 year-old brand truly command these premium prices in this economy or are they pricing themselves out of business?  In Q3’09 Harley CEO Keith Wandell stated “… we are moving with the speed and decisiveness required to bring our business strategy to life…”, little did we know the change reference was how fast they can increase prices.

It’s only January and already been a long winter.   Not enough time has passed to pay-off the holiday credit card charges so, as cool as it would be to ride this motorcycle a $10K down and 11% interest loan for 60 months would leave little discretionary funds to ride it anywhere!

Of course I might reconsider if they’d throw in a toaster.

Photo courtesy of H-D

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